China is the world’s largest auto market, and with the Auto Shangai underway this week, there is a lot of buzz as a lot of carmakers and auto specialists, and suppliers are getting ready to show off their auto muscles and their commitment to China.
At this year’s edition, Volkswagen is coming in with financial power arms as the company has announced that it will invest around one billion euros ($1.1 billion) in a new China center for the development, innovation, and procurement of fully connected electric cars. Marcus Hafkemeyer, chief technology officer of Volkswagen Group China, will serve as CEO of the new company.
The 100 %TechCo facility, which will employ 2,000 people, intends to merge vehicle and component R&D with procurement. The strategy appears to be motivated by the German automaker’s desire to better meet China’s rapidly changing consumer needs.
“This will leverage synergies in the development process and integrate state-of-the-art local technologies into product development at an early stage,” the company said in its announcement. That is, local suppliers will get to take part in the initial stages of product development so iterations can happen early on.
“The aim is to align the Group’s vehicles even more quickly with the wishes of Chinese customers and to achieve shorter time to market,” the company added.
The move follows Volkswagen’s previous attempts to drive localization for Chinese consumers. In October, the company announced a partnership with Horizon Robotics, a local auto chip startup, to develop advanced driver assistance systems (ADAS) and autonomous driving solutions for the Chinese market.
The launch of 100%TechCo in 2024 will help Volkswagen shorten the development cycle of new products and technologies by around 30%, the company said. The center is already expected to “play a major role” in the development of a future Volkswagen brand model set to debut in 2024.
Indeed, Volkswagen is up against a slew of smaller but more agile EV startups in China, its largest sales market, so adaptation is critical. Competitors include internet-native players such as Nio, Xpeng, and Li Auto, as well as new EV subsidiaries of established carmakers such as Geely’s Zeekr, as well as dominant players BYD and Tesla.
100%TechCo will be headquartered in Hefei, China’s eastern Anhui Province, where electric vehicle production is booming. Nio, a Nasdaq-listed electric vehicle startup, chose the city as its China headquarters and does the majority of its manufacturing there. BYD, which is backed by Warren Buffet, also has a production base in the city, where one of its bestsellers was able to roll off the assembly line in less than a year.
Auto Shanghai is an international automobile show held in Shanghai, China every two years. It is one of the world’s largest auto shows, serving as a platform for automakers to showcase their latest models and technologies to the Chinese market and the rest of the world. The event usually draws a large crowd, which includes industry professionals, journalists, and car enthusiasts. Auto Shanghai includes exhibits from both domestic and international automakers and covers a wide range of vehicle categories such as passenger cars, commercial vehicles, concept cars, and electric vehicles.
Finally, the newly formed company will integrate the development projects of all of Volkswagen’s Chinese joint ventures in China, which include SAIC Volkswagen, FAW-VW, and Volkswagen Anhui. For decades, foreign automakers entered China through joint ventures with local partners, until Tesla became the country’s first wholly foreign-owned automaker.